The Monetary System in the

International Arena

“It is well enough that people of the nation do not understand our
banking and monetary system, for if they did, I believe there would be
a revolution before tomorrow morning.”

-Henry Ford
 International Transactions
Foreign Exchange Market
• The place where the change of domestic into foreign money and vice
versa takes place
• an over-the-counter (OTC) global marketplace that determines the
exchange rate for currencies around the world. (Investopedia, 2020)

Participants
Banks Financial Institutions Consumers

Governments Business Firms

Balance of Payments (BOP)
• a summary statement of all transactions that take place
between a country and the rest of the world during a given
period of time (usually a year).
• uses a double-entry system of bookkeeping.
 Exchange Rate Regimes
• Three basic exchange rate regimes have operated during the
twentieth century: fixed exchange rates, flexible exchange rates,
and managed exchange rates.
1. Fixed Exchange Rates 2. Flexible Exchange Rates
- pegged at a certain level -The price of a currency is
by the national monetary allowed to rise or fall
authorities and can only according to prevailing
be changed by a demand and supply
government decision. conditions.
Exchange Rate Regimes continuation
3. Managed Exchange Rates
• sometimes referred to as a “dirty float”
• the monetary authorities intervene in
varying degrees in order to influence the
exchange rate in the desired direction by the
purchase and sale of foreign currencies.
The International Monetary System (IMS)
• a well-governed system looking after the
cross-border payments, exchange rates, and
mobility of capital.
• well-designed system that regulates the
valuations and exchange of money across
countries.

Purpose:
to enhance high growth
in the world with stable
price levels.
 The Different Systems That Have Prevailed
Throughout Modern Economic History

The Gold Standard Why did the Classic Gold

When exchange rates
were truly fixed. It was a
system whereby the
values of currencies were
fixed relative to the value
of gold, which was used as
a unit of account and the
main reserve asset.
Standard Collapse?
During World War, many
countries printed more
money in order to finance
their military requirements.
As a result of this, the money
in circulation exceeded the
gold reserves of the
countries.
 The Different Systems That Have Prevailed
Throughout Modern Economic History

Interwar Period Why did the Interwar Period

Britain was replaced by
the United States of
America as the dominant
financial powerhouse
across the globe. All the
economies had gone into
a depression with a higher
inflation rate.
domestic revamping and
collapse?
The fixed exchange rate
system collapsed with a
higher supply of money.
Almost all countries
started focusing on
not on international
trade.
 The Different Systems That Have Prevailed
Throughout Modern Economic History

The Bretton Woods System Why did the Bretton

The adoption of fixed, Woods System collapse?
but adjustable, The supply of US
exchange rates based on Dollars suddenly
the free convertibility of increased in the world
the US dollar to gold economy. 
Many countries
and the establishment
started questioning
of the International
the quantum of gold
Monetary Fund (IMF). reserves of the US
Government with the
supply of the US
Dollar.
 The Different Systems That Have Prevailed
Throughout Modern Economic History

The Present “Nonsystem”

After the downfall of
the Bretton Woods
System, there has not
been any formal
International Monetary
System in place.
The system is so
diverse that it is
sometimes referred to
as a “nonsystem.”
Individual Activity: Create a History Timeline Infograp

1. Create a History Timeline Infographic about the

Different International Monetary Systems that have
prevailed throughout Modern Economic History.
(20pts)

2. You may use any Design Tool Software (Adobe

Illustrator Adobe Photoshop, Canva, etc.)

3. Refer to the rubrics below. Send it as a .jpg file via

email to juliapagemorin@gmail.com with the subject
line: Surname_Section_TitleofActivity (ex: Dela
Cruz_BSA1-1_IMS-History-Timeline-Infographic)
Rubrics